Crocmedia Pty Ltd has recently been fined $24,000 by the Federal Circuit Court of Australia after it unlawfully continued an unpaid work experience arrangement with two workers despite the initial lawful work experience period having concluded.

Implications for employers

Employers should reassess their current work placement or internship arrangements to ensure these arrangements are either correctly classified as unpaid internships which do not involve an employment relationship, or to ensure that they fall within the Fair Work Act’s provisions for vocational placements. Generally, the unpaid work experience placement or internship is less likely to be classified as employment if they mainly benefit the intern, if the duration of the placement or experience is relatively short and if the intern is not expected or required to complete productive work.

Background

Crocmedia is a medium-sized business which operates in the sports media and entertainment sector in Victoria.

Two of Crocmedia’s workers commenced work after they contacted the company to seek work experience in the media industry. It was agreed that the first 3 weeks of work would be characterised as unpaid work experience. Following this, one of the interns was engaged for another 6 months and the other for another 12 months. They worked on an ad hoc basis as producers of a night radio program and the nature of their duties included preparing audio for programs, sourcing and arranging interviews and preparing run sheets.

For the period after the initial 3 weeks, Crocmedia classified the employees as “volunteers” and made “reimbursement for expenses” payments of between $75 and $120.

Fair Work Ombudsman investigation

Crocmedia fully cooperated with the Fair Work Ombudsman (FWO) and admitted that the applicants should have been classified as casual employees for the period after their initial 3 weeks of unpaid work experience.

Furthermore, Crocmedia took corrective action by undertaking to restructure their work placement arrangements, by back-paying the 2 employees and by back-paying a third employee who was also under an unlawful work placement arrangement. In all 3 cases, Crocmedia did not require the “reimbursement for expenses” to be repaid or offset against the payments.

Decision

Despite Crocmedia’s corrective actions, the FWO commenced proceedings against the company alleging, amongst other things, that Crocmedia failed to pay minimum wages and casual loadings.

The Court noted that under the Fair Work Act 2009, a worker who is on a vocational placement is not a national system employee and is not entitled to be paid any remuneration. Under the Act, “vocational placement” means a placement

  • undertaken with an employer for which a person is not entitled to be paid any remuneration; and
  • undertaken as an education or training course requirement; and
  • authorised under a law or an administrative arrangement of the Commonwealth, a State or a Territory.

If an unpaid work arrangement is not characterised as a vocational placement under the Act, it may still be a genuine unpaid internship or work experience if there is no employment relationship between the person and the company. If an employment relationship is created, the person will be entitled to wages.

Here, it was found that although Crocmedia did not deliberately employ a strategy to exploit the employees, the company’s retention of the benefits that flowed from the arrangements was exploitive.

After giving a 30% discount for Crocmedia’s early admissions, full cooperation with the FWO investigation and its rectification of underpayments, the Court imposed a total penalty of $24,000. In coming to this conclusion, the Court noted other factors which may influence the magnitude of a penalty. These included similar conduct on previous occasions, the size of the employer, the nature and extent of the employee or intern’s loss, the deliberateness of the conduct and deterrence.

In handing down the judgment, Judge Riethmuller also warned that “penalties are likely to increase significantly over time” as the public becomes more informed of unpaid work schemes.

Fair Work Ombudsman v Crocmedia Pty Ltd [2015] FCCA 140